Digitalizing a pathway to growth in Jordan

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Global experience shows that entrepreneurship stimulates job creation in the economy. The degree of entrepreneur success depends on the maturity of the underlying ecosystem. Traditional pathways for job creation and growth, however, are at risk of not producing enough jobs in the future.  The Government of Jordan has been encouraging entrepreneurship to shift these forecasts and accelerate the rates of job creation.

The entrepreneurship ecosystem in Jordan has been emerging over the last decade, but there are key challenges hindering its growth and connectedness.  Jordan’s ranking in the Global Entrepreneurship Index, which measures both the quality of entrepreneurship and the extent and depth of the supporting entrepreneurial ecosystem in 137 countries, improved by 23 ranks between 2014 and 2018 (going from 72 to 49). According to the Global Entrepreneurship Index 2018, the score of Jordan is equal to the Arab region’s average score of 37%. Jordan outperforms the region in product innovation, technology absorption, competition, startup skills, and cultural support indicators. On the other hand, Jordan lags in high growth, risk capital, risk acceptance, networking, and human capital indicators.

In 2019, the World Economic Forum (WEF) included 27 Jordanian startups among the top 100 in the Arab World.  Jordan’s technology entrepreneurs have shaped the region’s tech scene in the last decade (Maktoob, Souq.com, Arabia Weather, Mawdoo3, and many others). There are thousands of Jordanian technology professionals, who assume senior positions in key technology companies in the Arabian Gulf region and look for good opportunities to work back in Jordan. 

A recent World Bank survey of 230 Jordanian entrepreneurs found that Jordanian entrepreneurs are well-educated and have solid experience in business.  According to the survey, 94% of the Jordanian startups key founders hold BA degree or above, 62% have 10 years of experience or above, and 20% have 6-9 years of experience.  The majority of Jordanian entrepreneurs (71%) have previous experience working at middle- or senior- level jobs, and most of them (91%) worked as employees in a private enterprise, including their own, before establishing a business.

Jordanian entrepreneurs also tend to work in groups where co-founders bring in a mixture of diverse but complementary skills to support business operations. These characteristics show high quality composition that align with the characteristics of WEF’s 2017 top 100 startups from the Arab World. The World Bank surveyed the top 100 startups back then, studied entrepreneurship trends and policies, and published a chapter on entrepreneurship at the Arab World Competitiveness Report 2018 to inform government policies in the region.

As a step to support entrepreneurs’ aspirations, the Government of Jordan and the World Bank facilitated the participation of 14 leading entrepreneurs from Jordan at the 2019 London Initiative.  The entrepreneurs demonstrated the scale of ambition of Jordan's economic transformation, highlighted the growth potential in digital entrepreneurship, and pitched investment opportunities to global funds. Expansion into the wider regional/global markets is key for the Jordanian entrepreneurs, considering the relatively small size of the local market.

On challenges, Jordanian entrepreneurs perceive taxes as the key barrier facing their business (73%), followed by laws governing investments in startups (62%), excessive government formalities (58%), obstacles related to customs law and regulations (55%), and social security (52%). Focus group discussions provided insights on these challenges and suggested that tech-enabled entrepreneurs are unclear on the economic classification of activities that are tax exempted, burdened by the relatively high tax levy on imported/input services (26%), and troubled by the requirement to file tax on a monthly basis. Startups also expressed concerns about the complicated company restructuring process (increasing/decreasing capital, changing shareholders, etc), difficulty in obtaining work permits for skilled foreign labor, and inconsistent estimation of custom fees on imports. Clearly, there are specific legal and procedural reforms that the Government could implement to support businesses in Jordan. Entrepreneurs expect the Government to enable a friendly business environment, help open local and regional markets, and develop the local entrepreneurial ecosystem, according to World Bank’s survey.

In May 2019, the Government of Jordan introduced a new cabinet Ministry for Digital Economy and Entrepreneurship (MoDEE) to expand the mandate of the former Ministry of Information and Communication Technology and support digital entrepreneurship, electronic payments, and digital skills development. This comes as an organic step to support the growing role of the Government in supporting these digital economy pillars.

The Government has taken key steps in supporting the digital economy by endorsing a PPP model for expanding the national broadband network, supporting digital skills development for hundreds of youth, launching an ambitious plan for government e-payments, and supporting access to growth finance and global markets for entrepreneurs. These efforts will contribute to World Bank’s Moonshot initiative for MENA, which calls for doubling broadband access by 2021 and expanding access to digital payments.

To enable a business-friendly environment in Jordan, entrepreneurship ecosystem representatives (including Intaj, Oasis 500, Endeavor, JEIA, Startup Council, and others) and MoDEE have started a consultative effort, facilitated by the Word Bank and the Jordan Strategy Forum — a leading local think tank, to develop a policy matrix for addressing these challenges. MoDEE will recommend specific regulatory reforms to the Cabinet of Ministers for endorsement and lead the implementation afterwards.

To support the digital economy development in Jordan and the Mashreq region (Jordan, Lebanon, and Iraq), the Government of Jordan will host the first Digital Mashreq Forum in Amman on June 29-30.  The two-day high-level regional event will serve as a platform to discuss the role of digitalization in shaping the region’s future through the lens of government and business leaders. The Forum will provide a business networking opportunity for Jordanian entrepreneurs with regional and global investors. The Forum will also showcase Jordan as a regional hub for technology enabled services. Growing the entrepreneurship ecosystem and digitalizing business activities in Jordan would offer promising growth potential for the economy.

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